Two months after the announcement that Jeffrey Prosser's V.I. Community Bank would purchase Chase Manhattan's operations in U.S. and British Virgin Islands, the status of the deal remains unclear.
On Wednesday, the V.I. Banking Board met in a closed session to discuss the proposal. Nathan Simmonds, executive director of the banking board, didn't immediately return calls for information about the outcome of the meeting.
It is unclear whether the arrest and indictment of Innovative Communication Corp. Vice President John Tutien on five counts of bribery will affect the sale. Though VICB does not fall under the ICC umbrella, both companies are owned by Prosser.
There has been speculation in banking and legal circles that the Chase deal could be held up pending the outcome of the Tutein trial, which is slated to begin Oct. 4.
One local attorney who asked not to be named said, "Because of the nature of the investigation, this could hold up or nix the deal. But that is up to the FDIC (Federal Deposit Insurance Corp.) and the comptroller of the currency."
Charlotte Gilbert-Biro, a spokesperson for Chase Manhattan Bank's corporate offices in New York City, declined to comment on anything other than that the sale is continuing.
Michael Dow, president of VICB, didn't return calls Wednesday.
According to officials in the Division of Banking and Insurance, a part of Lt. Gov. Gerard Luz James II's office, the banking board sets policies and formulates and enforces laws and rules that regulate all banking institutions and loan businesses in the territory.
Although the application for the proposed sale was made to the FDIC, the banking board will issue a recommendation to the FDIC regarding the sale. The deal is expected to close by the end of the year, Gilbert-Brio said.
In making its determination, the banking board is considering, among other factors, the public interest, Division of Banking and Insurance officials said. As chairman of the banking board, James said, he has several concerns over the proposed sale.
"The first and most important concern is whether the sale would benefit the banking industry and the financial stability of the territory as a whole," he said. "Another concern is the territory losing a major player in the international banking community, and how this would affect potential investors to the territory."
The sale, terms of which have not been disclosed, would include VICB purchasing Chase's nine branches and 15 ATMs on St. Thomas, St. Croix, St. John in the USVI and Tortola in the BVI. The deal includes Chase Trade Inc., a business that provides services to U.S. exporters.
Deposits in Chase's business operations in the Virgin Islands top $500 million, with outstanding consumer loans totaling approximately $300 million. Commercial loans outstanding are approximately $37 million, Gilbert-Brio said.
VICB, with two branches on St. Croix, has approximately $68 million in assets.
Whether VICB's Industrial Development Commission tax breaks will extend to the Chase acquisition also remains unclear. VICB's Dow has said he believes the benefits will carry over. IDC Executive Director Frandelle Gerard, however, said the extension of the incentives could not be determined until the purchase is finalized and the government can review all the documents.
According to Division of Banking and Insurance officials, the banking board is waiting for information from the IDC regarding the criteria used to grant VICB's existing tax benefits, and whether these benefits would extend to the purchase.
Soon after the proposed sale was announced, a top official from the Farrelly administration said IDC benefits were extended to VICB to ensure that employees would not lose their jobs when Banco Popular bought out CoreStates Bank. The St. Croix branches of CoreStates were exempted from the Banco Popular purchase and bought by VICB.
Under the proposed sale, VICB has said it would hire all 280 Chase employees who opt to remain in their jobs.
VICB's 1995 IDC certificate, while giving the bank tax breaks until 2004, doesn't mention future acquisitions. Under the IDC agreement, VICB is exempted from paying 100 percent of its property taxes, gross receipts taxes and excise taxes on raw materials, equipment and machinery, and 90 percent of income taxes.
VICB was also granted dividend and interest withholding-tax exemptions.
VICB is owned by Prosser, who also owns Vitelco, Vitelcom, VitelCellular, V.I. PowerNet, St. Croix Cable TV, St. Thomas-St. John Cable TV, and the Daily News Publishing Co., which publishes the Island Trader, Focus, the Virgin Islander and Island Delights as well as the Virgin Islands Daily News; it also prints several other publications.
According to a source inside Chase, the bank paid $6 million in income tax in 1996, $7.5 million in 1997 and about $6.5 million in 1998.
